Asking AI · Why Is Profit Recovery Still Unstable Despite the Rebound in Scale?

Author | Li Xin

Editor | Wu Wentao

On March 30th, Henan’s only A+H listed city commercial bank, Zhengzhou Bank (002936.SZ), released its 2025 annual report, presenting a mixed picture of bottoming out and recovery with both hopes and concerns.

Scale Rebound and Structural Imbalance

By the end of 2025, Zhengzhou Bank’s total assets reached 743.67B yuan, an increase of 67.31B yuan from the beginning of the year, a growth rate of 9.95%, hitting a new high since 2018. Total loans stood at 410.26B yuan, up 5.82% from the start of the year; total deposits were 463.08B yuan, an increase of 14.47%. The momentum of scale expansion has significantly recovered, and the foundation of liabilities continues to strengthen.

In terms of operating efficiency, in 2025, the bank achieved operating income of 12.92B yuan, a year-on-year increase of 0.34%; net profit attributable to the parent was 1.9B yuan, up 1.03%. This thoroughly ended the previous two years of negative revenue growth and profit decline, and amid narrowing industry-wide net interest margins and profit pressures, the bank’s operating fundamentals have stabilized and recovered.

Asset quality and cost control also show positive trends: non-performing loan ratio fell to 1.71%, down 0.08 percentage points from the beginning of the year, maintaining a downward trend for three consecutive years; provision coverage ratio increased to 185.81%, up 2.82 percentage points; cost-to-income ratio dropped to 27.67%, down 1.28 percentage points year-on-year, well below the regulatory red line of 35%. All key regulatory indicators remain within safe margins. These overall data confirm a phased “turnaround,” but behind the impressive total figures, there are structural concerns and long-term challenges that cannot be ignored.

The quality of this performance lies in the transformation and adjustment of business structure. In recent years, Zhengzhou Bank has taken retail transformation as a core breakthrough for high-quality development, focusing on building four major wealth management service systems, with gradual results emerging.

In 2025, retail banking income reached 1.72B yuan, accounting for 13.32% of operating income, an increase of 2.34 percentage points from 2024. Personal deposit business performed especially well, with year-end personal deposits reaching 271.85B yuan, up 24.60% year-on-year, accounting for 58.7% of total deposits, becoming the most stable source of funds on the liability side; personal consumer loans exceeded 20 billion yuan for the first time, growing 20.9%; inclusive micro and small business loans totaled 57.33B yuan, up 6.78% from the start of the year. The retail customer base and service coverage continue to expand.

The wealth management track is accelerating even faster. By the end of 2025, retail wealth management financial assets reached 57.25B yuan, up 11.57% from the previous year; agency-based wealth intermediary income increased by 86.11% year-on-year; 675 new agency products were introduced throughout the year, forming a full-spectrum product system, breaking out of the traditional rough operating model of city commercial banks.

Meanwhile, Zhengzhou Bank remains committed to serving the local economy, vigorously promoting the implementation of its “Five Major Articles of Finance.” By the end of 2025, the balance of technology loans was 33.24B yuan, up 25.57%; digital economy loans reached 6.75B yuan, up 27.78%. The growth potential of specialized sectors is gradually being unleashed.

It is important to note that Zhengzhou Bank’s income structure still has obvious shortcomings. In 2025, non-interest income was 2.06B yuan, down 18.13% year-on-year, accounting for 15.92% of operating income. Among them, net fee and commission income declined by 13.95%, indicating that the intermediary business’s revenue-generating capacity still has room for improvement.

More critically, net interest margin continued to narrow. In 2025, the bank’s net interest margin was 1.61%, down 0.11 percentage points from the previous year, and has declined by 70 basis points since its peak in 2021. This directly drags down profitability, causing 2025 ROA and ROE to stabilize after previous declines, but still far below regulatory prudence standards and industry averages. The foundation for profit recovery remains unstable.

Unresolved Non-Performing Loans and Governance Challenges

Beyond structural weaknesses, Zhengzhou Bank faces dual tests of resolving historical burdens and improving corporate governance. Although overall non-performing loan ratio continues to decline, structural risks are not fully cleared, with real estate loans remaining the largest drag.

From 2018 to 2021, Zhengzhou Bank aggressively expanded real estate credit, with loans rising from 18.1B yuan to a peak of 34.44B yuan. As the industry downturn set in, related risks quickly surfaced, with the real estate sector’s non-performing rate soaring from 1.25% in 2020 to 9.55% in 2024.

Although the bank has reduced real estate loans by nearly 10 billion yuan over the past three years and transferred 15.01B yuan of non-performing assets in 2024, the non-performing rate of real estate loans still stood at 9.75% at mid-2025, with a non-performing balance of 2.06B yuan. Resolving existing risks will require a longer cycle.

Accompanying asset risks is frequent upheaval in core management. Since 2025, the bank has seen three vice presidents and three assistant presidents depart, leading to a temporary leadership gap. In February 2026, President Li Hong resigned for personal reasons after just over a year in office. This sudden departure not only raises concerns about governance stability but may also cause strategic wavering in the bank’s specialized positioning, affecting long-term transformation continuity.

Meanwhile, the capital adequacy ratio continues to decline, posing future risks. As of the end of 2025, the core Tier 1 capital adequacy ratio was 8.45%, just above the regulatory red line of 7.5% by less than 1 percentage point. The ongoing expansion of assets consumes capital continuously. If internal profitability cannot be effectively improved, the bank will face significant refinancing pressures.

Industry Changes and Transformation Challenges

From an industry perspective, Zhengzhou Bank’s transformation and challenges reflect the current survival situation of regional city commercial banks in China.

In 2025, net interest margins across commercial banks generally fell to a historic low of 1.42%, with city commercial banks averaging 1.37%. Although signs of stabilization have appeared, the industry remains in a cycle of narrowing margins, asset shortages, and increasing segmentation. Reports suggest that future net interest margin recovery will mainly depend on reducing liability costs, making the optimization of liability structure and stabilizing funding costs critical for city commercial banks’ breakthroughs.

In this context, the continuous increase in personal deposits at Zhengzhou Bank aligns with the core trend of industry transformation, laying a solid foundation for future liability cost optimization and margin recovery.

As a local bank rooted in Henan, Zhengzhou Bank’s core value lies in its irreplaceable geographical advantage. Henan’s GDP surpassed 6 trillion yuan in 2025, fueling massive local financial demand driven by urbanization and industrial upgrades. As a policy-oriented fintech operator in Henan, the bank has natural local resource advantages in connecting major provincial projects and advanced manufacturing supply chains. Its early deployment in specialized sectors may help cultivate a sustainable second growth curve.

To truly shift from “bottoming out and stabilizing” to “high-quality leap,” Zhengzhou Bank must address three key issues: continue resolving existing risks, fully clear burdens in real estate and other fields, and strengthen risk prevention; quickly rebuild its core management team, stabilize strategic execution, improve corporate governance, and rebuild market confidence; expand internal and external capital channels, continuously optimize income structure, enhance internal profitability, and ease capital pressures.

For Zhengzhou Bank, 2026 is a critical year for transformation and breakthrough. Only by leveraging its local advantages, deepening its differentiated positioning, and balancing scale growth with risk control can it stand firm amid the segmentation wave of city commercial banks and achieve sustainable, long-term development.

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